n Liabilities and Equity The stock is currently selling for $12.25 per share, and its noncallable $1,000.00 par value, 20-year, 7.00% bonds with semiannual payments are selling for $1,044.07. The beta is 1.15, the yield on a 6-month Treasury bill is 3.50%, and the yield on a 20-year Treasury bond is 5.50%. The required return on the stock market is 11.50%, but the market has had an average annual return of 14.50% during the past 5 years. The firm's tax rate is 40%. Refer to Exhibit 10.1. Based on the CAPM, what is the firm's cost of equity? 11.41% 12.03% 13.02% 12.40% 10.66%
n Liabilities and Equity The stock is currently selling for $12.25 per share, and its noncallable $1,000.00 par value, 20-year, 7.00% bonds with semiannual payments are selling for $1,044.07. The beta is 1.15, the yield on a 6-month Treasury bill is 3.50%, and the yield on a 20-year Treasury bond is 5.50%. The required return on the stock market is 11.50%, but the market has had an average annual return of 14.50% during the past 5 years. The firm's tax rate is 40%. Refer to Exhibit 10.1. Based on the CAPM, what is the firm's cost of equity? 11.41% 12.03% 13.02% 12.40% 10.66%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:n
Liabilities and Equity
The stock is currently selling for $12.25 per share, and its
noncallable $1,000.00 par value, 20-year, 7.00% bonds with
semiannual payments are selling for $1,044.07. The beta is 1.15, the
yield on a 6-month Treasury bill is 3.50%, and the yield on a 20-year
Treasury bond is 5.50%. The required return on the stock market is
11.50%, but the market has had an average annual return of 14.50%
during the past 5 years. The firm's tax rate is 40%.
Refer to Exhibit 10.1. Based on the CAPM, what is the firm's cost of
equity?
11.41%
12.03%
13.02%
12.40%
10.66%
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